The physical location of business facilities plays a important role in the success of the business. Facility of a business could be anything from manufacturing plant to a grocery store. The decision on selecting location should be based on factors related to the relevant business and its processes. This applies to heavy manufacturing facilities, light industry facilities, and retail & service facilities.

Site Selection

The main categories in current business environment would be whether they are service-related business or manufacturing related business. The location selection criteria also vary accordingly. The main factor for service-related business is usually access to customers which ensures they earn enough revenue to cover the cost of the location. For manufacturing related businesses there are several factors to be considered.

• Nature of labor force and cost
• Closeness to supply chain
• Distribution and transportation cost
• Energy cost
• Public infrastructure – Road, Drainage
• Government regulations and tax concessions

Quantitative Methods

There are techniques available to help businesses to decide on the correct location for their processes from a pool of choices. Mathematical quantitative models will allow the businesses to correctly evaluate every location prior to selection and bring them to a uniform platform for comparison.

1. Location Factor Rating – List down the important factors you prefer at the business location and decide on a weight to prioritize them. Then every location in consideration is provided with a score for the factors and the weighted scores are summed. This will provide a ranking system for the locations in consideration.
2. Center of Gravity Technique – Mainly useful in deciding the location of a distribution center or manufacturing plant. Transportation of goods depend on the weight of the goods and distance traveled from one location to another. So this technique allows the businesses to select a location which is center of movement in a geographical area relative to their all other locations to reduce the distance traveled and thus reducing the transportation cost.
3. Load Distance Technique – This technique is used to compare various locations in relation to existing facilities. By computing the weight of goods transported and the distance traveled within the facilities, this technique provides with the location which would minimize the transportation cost.

So the next time you look for new location for your retail shop, distribution center, warehouse or manufacturing plant, please conduct a prior location analysis to gain more advantage on the long run.